Groupe DANONE: Global Business Process Transformation

With international brands, such as Danone, Dannon, Evian and Aqua, Groupe Danone is the world leader in fresh dairy products and also boasts impressive worldwide No. 2 positions in beverages and the baby food market. The foods leader employs 90,000 people, operates more than 200 plants around the globe and commercializes its products in more than 120 countries. Groupe Danone reported €14 billion (over US$20 billion) in total sales for 2006, and posted 13.6 percent operating margin.

At the end of 1996, Groupe Danone began moving assertively to further grow its business, disposing of non-core activities while refocusing its portfolio (through acquisitions and product innovations) on high-growth, high-margin, core businesses such as dairy products and beverages. It expanded across Asia, Latin America, Central Europe, Africa and in the Middle East.

The strategy worked well, helping Groupe Danone to quickly grow and to see several of its country business units growing by some 20 percent or more. Though the strategic refocus yielded a one percent growth in operating margin to 10 percent over 12 months, senior leaders at Groupe Danone were looking for ways to achieve and maintain much stronger margin growth over a sustained period.

Executives at Groupe Danone acknowledged that having many small business units with their own processes, working independently, caused inefficiency and control issues that were threatening margin growth. The company needed to create a highly integrated and flexible operation with more insight, speed, efficiency and seamless execution.

This would set it apart from the competition and provide what Accenture terms “distinctive capability,” an organization’s unique formula for business success aimed at outperforming the competition. Through its extensive research into what makes a high-performing business, Accenture identified distinctive capabilities as one of three building blocks that underpin high performance in the food and non-alcoholic beverage industry.

As a first step to improving growth, Groupe Danone undertook a preliminary study with Accenture to determine how a group-wide enterprise resource planning (ERP) transformation program could help to:

• Drive a single corporate strategy across the company’s three core businesses.
  
  
• Generate new and streamlined operational synergies.
  
  
• Ensure more even investment across the organization to benefit both large and small business units.

Accenture brought together a diverse team of professionals from its SAP, consumer goods and services, customer relationship management, supply chain management, and finance and performance management practices to provide insight and advice. An ambitious initiative named THEMIS was conceived by Groupe Danone and Accenture and approved by the executive committee.

THEMIS would transform global operations from a cluster of disparate small and medium-size business units into one integrated enterprise with common global processes. Over time, this large-scale process transformation program would pull together most of Groupe Danone’s business units under a set of Danone Operating Models.

Accenture found that a new ERP solution, based on SAP software, would harmonize common practices and processes across key business functions including commercial, supply chain and finance, and streamline information systems worldwide. Groupe Danone, working with the Accenture team, designed an overall approach for implementing the ERP solution following best practices, but customized to Groupe Danone’s strategy and culture.

Accenture continued to leverage its best experiences and experts, Global Delivery Network resources and alliance with SAP to design, customize and build the SAP R/3-based system. The ERP system provides real-time visibility into key processes, including finance and controlling, sales and distribution, production planning, materials management, e-procurement and inventory management, plant maintenance, quality management, and supply chain planning.

While development of a core system of this scale was a challenge, after rigorous system tests and pilot implementations in four country business units, Groupe Danone and Accenture began an ambitious rollout plan to deploy the solution at more than 30 business units in North America, Latin America and Western, Central and Eastern Europe.

At the end of 2007, the solution supported close to 8,000 users, some 350,000 customers and 70 percent of Groupe Danone’s business. It is scalable, transportable and customizable to support all business units within Groupe Danone, from larger units supporting up to 1,000 users to those with less than 50 users.

Thanks to the solid commitment of Groupe Danone’s executive leadership from the outset of the project, THEMIS reached its objectives and continues to be successful.

Groupe Danone has created a stronger business foundation and the ability to reach new, appetizing levels of growth on its journey to achieve high performance. In fact, THEMIS satisfied all three of the business objectives identified by Groupe Danone’s senior executives:

• Driving a single corporate strategy across the company’s three core businesses.
  
  
• Generating new and streamlined operational synergies.
  
  
• Ensuring more even investment across the organization to benefit both large and small business units.

In driving integration across Groupe Danone, the program helped connect the different businesses under a single business platform with common practices, processes and information systems. The improvement helped reduce end-of-month overdue receivables by 75 percent in some country business units.

Likewise, better visibility into integrated sales and logistics networks, from the factory to the distribution center to the customer’s site, allowed Groupe Danone to significantly reduce finished goods inventory and finished goods losses, sometimes by as much as 50 percent. With a system that integrates inventory management, executives also better understand where finished goods losses occur and can act quickly to address the issue and minimize loss.

THEMIS is also helping Groupe Danone generate operational synergies; among them is the standardization of the purchasing function. The streamlined process has engendered a more strategic selection of suppliers and thus fewer of them, lower procurement costs, greater options for managing prices and more efficient spending.

Today, Groupe Danone enjoys its strongest growth ever. As an integral part of the company’s strategy to build a robust, nimble business, THEMIS has played a role in the company’s success and has contributed to achieving group operating margin of 13.6 percent in 2006—that is €1.9 billion (US$2.8 billion) and 19 percent growth over 2004. At peak, THEMIS directly contributed to a group operating margin growth of 20 basis points.

Groupe Danone can better respond to and manage a wealth of business opportunities across the globe, which over the last five years has contributed to 6.7 percent annual, organic sales growth.